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GB Group private equity buyout: How much will GBG shareholders get from GTCR?

By David Burrows

12:51, 14 September 2022

Identity verification on a mobile. Photo:Shutterstock
Identity verification on a mobile. Photo:Shutterstock

London-listed, digital identity specialist GB Group (GBG) is known to be a target for a possible takeover by US private equity fund GTCR.

Shares in GBG have soared since the PE approach was made public late last week?  - Shares were up 35% after the news broke to a high point of  647p before falling back down slightly to the current 620p level.

It is difficult to know how much will GBG shareholders get from GTCR since the £1.3bn figure being bandied about would suggest a 515p-a-share offer, well below the current share price. However, no firm offer has yet been made, and this speculation could be wildly wide of the mark, particularly if other bidders enter the fray.

And this is far from unlikely, given the bargain hunting right now from overseas investors in UK companies that with a weak sterling are seen as attractively priced.

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UK tech firms being snapped up

Cybersecurity firms have been in the acquisition spotlight recently. Avast (AVST) was recently taken over by US rival NortonLifeLock, and the recent interest in Darktrace (DARK) by private equity group Thoma Brava has been well documented.

So far it is only GTCR, the Chicago-based PE group that has thrown its hat in the ring for GBG, confirming it is ‘considering a possible cash offer for the company,’ though stressing ‘there can be no certainty that any firm offer will be made’.

Now that talks between the two parties have begun, GTCR has until October 4 to make a formal offer for GBG.

GBG is a relatively new business which began to show high growth in the mid 2000s. Based in Chester in the north of England, GBG employs around 1,200 people and provides identity and document verification services to customers around the globe.  

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Listed on the AIM market, in its last financial report for the year to end of March 2022, GBG posted revenue of £42.5m, with an operating profit of £58.8m.  It has steadily acquired strategically, with the latest additions being Acuant and Cloudcheck in New Zealand.

There is no certainty that the GBG board, after evaluation, will approve the takeover. And there are concerns in general that there are good and bad elements in deals of this kind.

Pros and cons of a de-listing 

As Danni Hewson, financial analyst at AJ Bell explains: “You could see the potential buyout of GB Group as good or bad news. On the plus side the UK is brilliant at creating, supporting and nurturing innovative tech companies to a point where they become really enticing targets for private equity and this is just another example of that.”

She points out that the company has really solid numbers and despite being dragged down by the general market malaise it’s still got a great deal of investor support.

“On the minus side this is potentially another example of a UK tech firm being snapped up on the cheap, pulling it out of London markets when it’s still a relative minnow before it has a chance to develop into one of tomorrow’s tech behemoths.”

Hewson concludes: “From that perspective it is a cause for concern about the potential London really has to be a serious player in the future. If the good stuff gets sucked out before it gets chance to become great stuff where are tomorrows FTSE 100 contenders going to come from.”

Markets in this article

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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